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LIPPO MALLS INDONESIA RETAIL TRUST ANNUAL REPORT 2014
28. FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT’D)
28F. Interest rate risk
The interest rate risk exposure is from changes in fixed rate and floating interest rates and it mainly concerns financial
liabilities which are both fixed rate and floating rate. The following table analyses the breakdown of the significant
financial instruments by type of interest rate:
Group
Trust
2014
2013
2014
2013
$’000
$’000
$’000
$’000
Financial liabilities with interest:
Fixed rates
472,886
469,852
–
–
Floating rates
151,473
146,064
151,473
146,064
Total at end of the year
624,359
615,916
151,473
146,064
The floating rate debt instruments are with interest rates that are re-set at regular intervals. The interest rates are
disclosed in the respective notes.
A proactive interest rate management policy has been adopted to manage the risk associated with the changes in
interest rates on the Group’s loan facilities.
For 2013, the Group had minimised the level of interest rate risk by locking 51% of its bank borrowings at fixed rates
as described in Notes 22A and 26A. The interest rate swap expired in 2014. Subsequent to the year-end, several interest
rate swap contracts had been entered into by the Trust to convert the floating interest rate to fixed rate (Note 33(ii)).
The Group does not designate interest rate derivatives as hedging instruments under a fair value hedge accounting
model as described in Note 2. The derivatives are carried at fair value, changes in the fair value are recognised directly
in the profit or loss. However, there is no impact to distributable income until realised.
Sensitivity analysis:
Group
2014
2013
$’000
$’000
Financial liabilities:
A hypothetical variation in interest rates by 10 basis points with all other variables
held constant, would have an increase/decrease in total return before tax
for the year by
155
73
The analysis has been performed for floating interest rate over a year for financial instruments. The impact of a change
in interest rates on floating interest rate financial instruments has been assessed in terms of changing of their cash
flows and therefore in terms of the impact on net expenses. The hypothetical changes in basis points are not based
on observable market data (unobservable inputs).
Notes to the Financial Statements
(Cont’d)
31 December 2014
